Despite surging construction costs homebuilder confidence has held steady in May according to the most recent National Association of Home Builders/Wells Fargo Housing Market Index released This Week in Real Estate. Additionally, Freddie Mac reports that home prices are climbing at their fastest pace in more than 15 years. Below are a few newsworthy events from the third week of May that influence our business:
NAR Predicts Consumer Spending Will Propel Continued Economic Growth in 2021. According to the National Association of Realtors, after recording the quickest recovery in the nation’s history in the wake of the COVID-19 pandemic, the U.S. economy is expected to kick into higher gear in 2021. NAR Chief Economist Lawrence Yun anticipates the economy will grow 4.5% in 2021. “Consumers will begin to spend massive savings, and do more shopping, restaurant dining, traveling and in-person house hunting,” he said. The marketplace has surpassed pre-pandemic levels in terms of sales, but the fast-paced recovery has contributed to historic home price growth. In fact, an NAR report released this past week found that 89% of metros saw prices climb at double-digit rates on a year-over-year basis during the first quarter of 2021. “With more inventory and some easing in demand, home prices are expected to shift to mid-single-digit appreciation by the fourth quarter and in 2022,” Yun said.
Buyers Seek Larger Mortgages as Home Prices Surge. Home prices have significantly jumped over the past year, forcing home buyers to borrow more to keep up. The average mortgage purchase application reached $411,400, the highest since February, according to the Mortgage Bankers Association. The average loan for a new home rose to $377,000 last month, a record high. Home prices are climbing at their fastest pace in more than 15 years. “We’ve seen very red-hot house-price appreciation across the country – double digits nationally,” says Len Kiefer, deputy chief economist at Freddie Mac. “That puts pressure on loan sizes because, to purchase a home at a higher price, you’re going to need to borrow more money.” Also, more homeowners have been upsizing since the beginning of the pandemic.
Homebuilder Confidence Holds Steady in Face of Rising Costs. Homebuilder confidence remained unchanged in the latest National Association of Home Builders (NAHB) and Wells Fargo Housing Market Index (HMI) report, holding steady at 83 for newly-built single-family homes in May. Regionally, homebuilder confidence in the South rose one point to 84, while the West remained unchanged at 90. The Northeast and Midwest both saw significant drops of four and three points, respectively, to 82 and 75. Overall, homebuilder confidence in the market remains strong due to a lack of resale inventory, low mortgage interest rates and what NAHB Chairman Chuck Fowke called “a growing demographic of prospective home buyers” – even as younger homebuyers struggle to compete in a hot market.
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Real Estate is eligible to receive no-obligation home warranty coverage from American Home
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